On the Road to the New Economy

An international tour of Internet financial applications and ideas supports ages-old, basic truths about business

By Nicholas Imparato

A recent series of road trips took me for two months across europe, Africa, and the Middle East. Visa International (London) sponsored the tour along with an assortment of supporting government agencies. The topic was the impact of the Web on financial services, and the engagement involved managers and executives from Motorola, Siemens, Barclays Bank, and other technology and finance firms.

A mix of strong personalities and diverse cultures added to the intellectual challenge. Yet, amid the separate impressions I gleaned in each locale, there was one overarching conclusion. Here is a location-by-location whisper and the lesson that developed.

Johannesburg, South Africa

Silicon Valley might be ground zero, but leadership is universal. The first impression is unmistakable for all of us who are new to this part of the world: The regard that visiting executives have for the South African bankers and technology vendors is high. They see these South Africans as insightful about industry trends (such as payment systems and e-commerce) and ready to prove that leadership can come from anywhere on the planet.

Malcom Williamson, the CEO of Visa International, is betting on a new security protocol called "3-domain" that will allow all parties to a transaction to know who they are doing business with. (The three domains refer to the authentication processes associated with the buyer, the seller, and the pipe that connects them.) The objective is to push 3-domain as an emerging global standard, as it adapts to European technology (the Secure Electronic Transaction system) and the U.S. protocol (Secure Sockets Layer). Williamson is a serious person and has traveled thousands of miles across three continents from his San Francisco base to share his vision and his ideas. It is clear in private conversations that the trip is about more than schmoozing with some Visa partners. There are lessons to be learned, technologies to be shaped, and a strategy that needs cultivation by tech-savvy leaders in financial services. Hence, South Africa.

In this setting it is easy to recognize that globalization is not just about distributed manufacturing and markets; it is also about intellectual leadership. Whatever the new economy holds for the future, one thing is certain: More people from more places will be mobilizing the economy than ever before. Consider one implication, that although India today might be a place where someone else's brainchild gets programmed or wired, it is only a matter of time before India escalates its activity to higher added-value functions, as in the selection and design of next-generation products. And that intimates an entirely new chapter of international competition.

Paris, France

Partnering skill can be a differentiator. Sean Geer, the European editor of Business 2.0, wins the audience with data that challenges Scott McNealy's dictum that the "only partnership is a purchase order." One part information arbitrageur and one part cheerleader, he eloquently reinforces his point with a litany of examples. Covisint (the B2B exchange involving Ford, General Motors, and DaimlerChrysler) is a search for efficiencies that each partner needs. Terra Networks and Lycos Inc. contribute, respectively, wireless technology and search engine expertise in an effort to leapfrog over competitors in the race for customer acquisition.

Whereas the initial challenge to partnering might come from a federal agency (in the case of Covisint - think monopoly issues), or from the marketplace and technology (for Terra and Lycos), the hurdle for a lot of companies is something more elusive. The talk during this tour in hallways and at lunch tables is less about mixing and matching technologies or co-branding programs than I had expected. It is almost always about styles of leadership, organizational cultures, customer expectations, and relationships. - you know, the soft stuff, the art of partnering.

Although it isn't represented at the meeting, Cisco is mentioned time and again in the same context: People have tremendous admiration for this company that has been so successful at digesting billions of dollars of acquisitions while building business worldwide. The key, so the buzz goes right there in Siemens AG's home territory (the European Union), is that Cisco focuses on helping to shape an ecology of interested parties: customers, employees, and other vendors. Based on the soundings in this meeting, Cisco does right all the things you have ever heard about partnering, only more so. And I can understand, in a way that goes beyond just an intellectual appreciation, that partnering acumen is increasingly going to drive new business over time. If nothing else, Cisco has raised the level of expectation.

Dubai, United Arab Emirates

Vision and courage trump the past. Here is one to take to your strategy managers: Dubai, one of the seven United Arab Emirates (UAE), has created the world's first business-to-consumer (B2C) Web site to carry a government quality guarantee on goods and services accessed through the Web site. This bold policy gives e-commerce a credibility that is unmatched anywhere. But Dubai, you ask?

Once a small trading city with some of the culture of a sleepy fishing village, Dubai now projects the image of a real "comer." More important, Sheikh Mohammed Bin Rashid Al Maktoum, the head of government, has driven the transformation of Dubai over the past few years into a global commercial and trading center. Its incoming business and leisure travel is 11 times the size of its population of just under one million - a resident population that represents some 110 languages and nationalities, although everyone speaks English. It has the highest PC/mobile phone/Internet penetration in the region; its Internet penetration has doubled in less than a year (with access by 17 percent of the UAE's population), is the highest in the Middle East, and is higher than most European countries'. Mobile phones are ubiquitous and probably the device of choice, going forward.

The emirate's Free Zone authority is investing in a city/campus concept with incubators, research and development centers, venture capital operations, and large-scale hard infrastructure enterprises such as Dubai Media City, with all the desired attributes: high bandwidth, redundant high-speed Internet connection, and service guarantees. Another of the projects, Dubai Internet City, has signed up Compaq, Cisco Systems, Microsoft, Oracle, Sun, and Hewlett-Packard. Several companies are already in the process of moving their development efforts there from India and Europe.

Yet, the dominant element of what leadership brings to the effort is a clear sense of mission. In this way, the relaxation of labor laws (no work permits or residence permits), lack of taxation, and new cyber and intellectual property regulations to build confidence in the vision of Dubai as an e-commerce hub are characteristics that all hang together. The strategy, as I heard said many times, is one of combining the "infrastructure of Singapore, the financial muscle of Wall Street, the talent of India, and the attitude of Delaware." Its root is an optimistic, "can do" attitude that, if I weren't afraid of offending someone here or there, I would label as, well, American.

Cynics might say that the effort is a long shot, an example of well-intentioned bright people chasing rainbows. But in this group of several hundred conference participants from all over the world, enthusiasm is high and no one is willing to take a bet against Dubai. No one.

Riyadh, Saudi Arabia

Disruption has many faces. The disruptive effects of the Internet have been described before. Amazon excited investors because it was going to build business at the expense of traditional booksellers. Yes, online book sales amounted only to less than five percent of book sales last year in 1999 and won't get to 10 percent for another two years, according to Jupiter Research, but we're still talking significant dollars ($1.3 billion in 1999 and $8.6 billion in 2001). Air travel services on the Web exceeded $5 billion last year and were running about 10 percent of the market. Travel agents bear the burden.

This data is easy to cite (and I enjoy doing so in my keynote). But there is a point when you can feel people getting edgy. That the transparency of the Web will disrupt traditional business models has to be mentioned in any talk about online banking. An illustration: If it is true that 80 percent of a bank's profits come from 20 percent of its customers, you have to ask who those customers are. Most likely they are the more affluent, more educated, and thus more tech savvy subset of customers. In short, the institution's most important customers are also likely to be the same who will demand more from Web-enabled financial services. The consequence will be less opportunity for one class of customers to subsidize another, and that is big-time disruption.

Sheikh Hamad Al-Sayari, governor of the Saudi Monetary Agency, the Kingdom's central bank, shares his understanding of the Internet's potential. He is confident in describing the efforts his country is making to join the Internet age. The dilemma I see is that the majority of Internet users in the Kingdom are younger than 18, and like young people everywhere they are enthusiastic for what's new and different, without having the perspective that experience can bring to absorbing innovation in optimal ways. Destabilization of social norms is a much bigger issue than anything that can be said about business models. One is about economic transitions, the other about the nature of civilization itself.

The More Things Change

Although each tour stop yields a clear lesson about how the Internet economy might work or about the challenges it faces, the common thread across locales is this: Social context matters. Just as real estate and travel professionals know that technology is unlikely to replace the need for person-to-person contact, so do Internet strategists need to appreciate the significance of the less tangible factors in building a new capitalism: sources of leadership, talent for coalition building, vision and courage, and skill at managing disruption. Johannesburg, Paris, Dubai, and Riyadh - they each have a message akin to that refrain from Casablanca: The fundamental things apply, as time goes by.